It’s the most wonderful time of the year- for the IRS. Yes, it’s tax time, so if you’ve found yourself waking up in a cold sweat and not knowing why, the impending dread of piles of paperwork and confusing forms could be the culprit. There’s a lot to prepare in order to file on time, and you want to make sure that you’re getting the best refund possible. Here are 5 tax planning strategies to boost your refund:
Stay Organized All Year
One of the biggest mistakes that people make is waiting until the last minute to organize all of their necessary paperwork for filing taxes. Get in to the habit of saving receipts, making copies of important papers, and filing everything away in a safe place. It will save you hours of agonizing over random expenses that you can’t recall, and going on fruitless searches for those illusive documents that you absolutely need to claim a deduction (trust me, I’ve been there!)
Keep excellent records of all of your business related expenses and charitable donations. Yes, it can be a hassle to file away those expense receipts right away, but you will definitely thank yourself come tax time.
Max Your Retirement Fund
Hopefully you have a retirement account open and are making the maximum contributions to it every year. If not, it isn’t too late to get an IRA open for the previous year. The more money that you can put into it throughout the year, the less taxable income you will have.
I check the max contribution limits for the year and meet them so that I can lower my taxable income. The contributions that you make to a traditional IRA will reduce your overall tax liability.
Check Your Filing Status
Unless you’ve gotten married or divorced recently, you probably don’t give much thought to your filing status. However, you should check over it to make sure that the one you choose is providing you with the greatest refund. It will only take a little time, and it could equal some major cash in your pocket.
If you’re married, then you probably don’t even question whether or not you should file jointly, because it seems like a no-brainer. I automatically assumed it was the best option, but turns out that that isn’t always the case. Check out what your refund would like look if you choose married but filing separately- you may be surprised. Some couples can actually make out better by filing separate returns. There are five filing status options to select from, so check each applicable one out before settling.
Research Deductions and Credits
Although most tax filing software programs will automatically find the deductions and credits that you should qualify for, you could actually be eligible for others. There is a wealth of information available today about the tax code, but it takes some time to research and dig deeper to see what you could benefit from. The same applies to state taxes, too. Your state may be offering certain credits that you qualify for, so do a little homework in preparation for filing.
Watch the Calendar
By being strategic about payments before the end of the year, you could end up reaping the rewards in the form of a bigger tax refund. For example, I pay my property taxes before December 31st religiously because this allows me to itemize the deduction and increase my refund. Cha-ching! I also buy my tax preparation software before the end of the year so that I can deduct the cost. Schedule medical procedures before the year is up to increase the chances of getting a deduction for those expenses, as well.
Waiting until tax season to get ready for filing means that you could be missing out some big savings. Be prepared, do your research, and stay on top of your expenses throughout the year in order to boost your tax refund.